Incident: The company released its 2024 semi-annual report. In 2024 H1, the company achieved revenue of 2.865 billion yuan, an increase of 9.16% year on year; realized net profit of 0.425 billion yuan, an increase of 3.43% year on year; deducted non-net profit of 0.422 billion yuan, an increase of 3.04% year on year. In 2024, Q2 achieved operating income of 1.537 billion yuan, up 16.96% year on year and 15.75% month on month; realized net profit of 0.244 billion yuan, up 6.75% year on year and 35.36% month on month; realized deducted non-net profit of 0.234 billion yuan, up 2.11% year on year and 24.66% month on month.

Benefiting from the increase in on-hand orders, Q1 performance in 2024 achieved steady year-on-year growth: in 2024, the company continued to increase the promotion of Mosfet, IGBT, SiC and other products in the industrial, photovoltaic energy storage, new energy vehicles, artificial intelligence and other markets. Overall orders and shipments increased year-on-year, and the company achieved both revenue and profit growth. In terms of profitability, H1's gross margin in 2024 was 29.63%, -0.48pct year on year; the company's net margin was 14.75%, or -0.69pct year on year. In terms of expenses, in 2024, the company's sales, management, R&D and financial expenses rates were 4.11%/4.84%/6.88%/-2.26%, respectively, with year-on-year changes of -0.08/+0.03/+0.59/+1.90pcts, respectively. Among them, the financial expense ratio and amount both showed a year-on-year decline, mainly due to fluctuations in foreign exchange rates and a decrease in exchange earnings. We believe that the company's overseas business is also expected to benefit from the end of the inventory removal phase in overseas markets and the recovery in demand from overseas customers. At the same time, in the future, as the semiconductor industry continues to recover and downstream demand gradually picks up, the company's performance is expected to recover quarterly, and profitability is expected to continue to improve.

Overseas business is gradually recovering and boosting production capacity construction in Vietnam: As domestic companies gradually break through the core technology of high-end products in chip design and manufacturing processes, and fill domestic technology gaps in more fields, the quality, performance, and technical standards of domestic power semiconductor products continue to improve, brand recognition gradually increases, opportunities for domestic substitution and overseas substitution are becoming more apparent, and the company's overseas market share is expected to continue to increase.

In 2024 H1, the company accelerated the construction of factories in Vietnam and the layout of overseas outlets, and accelerated the construction of innovative platforms and carriers such as overseas R&D centers. The company's industry position, brand value and global influence continued to improve.

In Q2 2024, along with the end of the inventory removal phase in overseas markets, overseas customers increased their intention to purchase the company's products, and the company's overseas business sales revenue increased sequentially, driving the company's overall gross profit level to rise accordingly.

Demand for semiconductors is recovering moderately, and we expect automotive SiC modules to be launched in batches: H1 in 2024, the semiconductor industry will recover moderately, and demand in downstream applications will pick up. Among them, demand in the domestic automotive electronics and consumer electronics industry is strong, and the industrial market is gradually improving. In response to this, the company continues to optimize the downstream structure and product structure in line with market demand, and actively develop domestic and overseas markets and customers. At the same time, the company's 8-inch, 12-inch G2 platform 40V SGT MOSFET chip based on the Fabless model completed the 0.48mR~7mR series layout for motor drive applications such as automotive EPS, BCM, oil pumps, water pumps, etc., successfully passed vehicle level reliability verification, and entered mass production stage through some customer tests; completed the development of N60V/N100V/N150V/P100V vehicle-grade chips, and realized a variety of applications for in-vehicle DC-DC, wireless charging, headlights, load switches, etc. Mass production of products. At the same time, the company has developed automotive silicon carbide modules and reached testing and cooperation agreements with a number of Tier 1 and terminal car companies. It is expected that in 2025, the main drive silicon carbide modules produced nationwide will be launched in batches. The continuous introduction of silicon carbide products has laid a solid foundation for the company to achieve a one-stop supply of a full range of semiconductor power device products.

Maintaining a “buy” rating: The company's main products mainly include materials, wafers and packaging devices. The company's products are widely used in many fields such as automotive electronics, clean energy, 5G communications, security, industry, and consumer electronics. In 2024 H1, the company actively promoted a number of key R&D projects and developed a variety of IGBT and silicon carbide module products. These products are expected to become an important growth pole for the company's 2024 performance. As the penetration rate of new energy vehicles in China continues to increase, demand in the automotive electronics market is expected to grow rapidly, the company's vehicle regulation business is expected to continue to benefit, and the room for the company's performance growth is expected to open up further. Considering that the industry's boom in the first half of the year fell short of expectations, we lowered our profit forecast for the full year. We estimate that the company's net profit for 2024-2026 will be 0.975 billion yuan, 1.188 billion yuan, and 1.52 billion yuan respectively, EPS will be 1.79, 2.19, 2.80 yuan/share, and PE will be 20X, 16X, and 13X respectively.

Risk warning: Industry demand recovery falls short of expectations, downstream demand falls short of expectations, production capacity investment falls short of expectations, and market competition intensifies.